UK: Corporate Manslaughter – Are Directors The Bait?

Today, Lion Steel Equipment Limited ("Lion Steel") became the third company to be sentenced for the new offence of corporate manslaughter when it was fined £480,000 plus Prosecution costs of £84,000.

However, what is truly remarkable about this case is that Lion Steel pleaded guilty to corporate manslaughter even though it was not on trial for that offence at the time! The obvious question to ask is why?

The answer is the pressure placed on the company's directors (who were on trial individually for offences of gross negligence manslaughter and breaches of health and safety legislation) by the prosecution.

With the prospect of a possible custodial sentence (gross negligence manslaughter attracts a maximum sentence of life imprisonment), this article looks at directors' duties and whether the tactics adopted by the Prosecution in focussing on the company's directors made them feel sufficiently vulnerable to allow the company to plead guilty to a charge that was not even before the court at the time.

Background to the trial

The company's plea to the new offence of corporate manslaughter (contrary to the Corporate Manslaughter and Corporate Homicide Act 2007 ("the Act")) was entered during the trial in June 2012 at which three of the company's four directors were charged with individual gross negligence manslaughter and the company stood charged with one offence of a breach of Section 2 of Health and Safety at Work Act 1974 ("HSWA"). In addition, each director was charged with a breach of Section 37 HSWA (which relates to directors and senior managers).

Whilst Lion Steel had originally been charged with the offence of Corporate Manslaughter (which only applies to organisations) this charge was severed from the other charges following an earlier application, made on behalf of the company, and was due to be tried separately after the conclusion of the trial against the directors. The trial of the directors mainly focused on directors' duties and the duty of care they owed employees for their safety.

Following the collapse of the manslaughter case against two of the directors, discussions were entered in to with the prosecution who agreed to drop all remaining charges against the individual directors in return for Lion Steel pleading guilty to Corporate Manslaughter. Questions may be raised in the future as to whether it was in Lion Steel's best interests to plead guilty to this offence which, in turn, could focus attention on the decision making of the directors and whether they breached their fiduciary duty to the company.

Lion Steel Equipment Limited

Lion Steel is involved in the fabrication and manufacture of steel cabinets and shelving systems. The company operates from two sites; one based in Hyde, the other in Chester. The structure of the company was organised so that one director, Kevin Palliser, had overall responsibility for operations at the Hyde site whilst his co-Director, Richard Williams (who was represented by Clyde & Co), had the same responsibility for Chester. The third Director charged was the Finance Director, Graham Coupe.

On the 29 May 2008 the company's employee, Mr Berry, went on to the roof at the Hyde premises in order to locate and inspect a leak. Whilst on the roof Mr Berry fell some 30 feet through a skylight which resulted in him suffering fatal injuries. The Prosecution alleged that Mr Berry had not received adequate training to work on the roof, there was no risk assessment or safe system of work for undertaking roof work at the Hyde site and there was inadequate supervision.

The Prosecution's Case on Directors' Duties

The Prosecution's case was that each individual director owed the deceased a common law and statutory duty of care which they had breached and that the breach of duty which caused Mr Berry's death was so serious as to constitute a criminal act.

In part, the Prosecution contended that the directors' duty of care arose simply out of the office they held. It was argued that the directors personally owed each and every employee of the company a duty to take care of their safety regardless of the relationship between director and employee, or whether the director had any involvement with the work the employee undertook.

At an early stage during the proceedings an application was made to the court which resulted in the corporate manslaughter charge being severed from the indictment and an order made that that offence should be tried at a later date after the company's health and safety breach and the directors individual charges had been dealt with.

What application did Lion Steel make to the Court?

The Act, which came into force on the 6 April 2008, created the new offence of corporate manslaughter. It specifically states that the new offence will not apply where the conduct or events, which the Prosecution allege give rise to the offence, occurred wholly or partly before the Act came into force. In those circumstances, any prosecution for corporate manslaughter should be brought under the old law.

With this provision in mind, Lion Steel launched the following two-pronged application to the Court:

1 As all the acts and omissions complained of by the Prosecution occurred prior to 6 April 2008, any corporate manslaughter prosecution should have been brought under the old common law and could not be brought under the Act.

2 In the alternative, if the Prosecution was allowed to continue with the corporate manslaughter charge, then it should not be able to rely on evidence of acts and omissions which occurred prior to the commencement of the Act.

The Court's decision

The Court's decision in relation to each limb of Lion Steel's application was:

1 The events which gave rise to the offence (namely on the day of the accident when the employee was instructed, or allowed, to go on to the roof from which he fell) occurred after the new Act had come into force. On that basis, the Court stated that the charge faced by Lion Steel was the correct one.

2 The Prosecution should be allowed to rely on the evidence of a state of affairs which existed before the new Act came into force BUT only to demonstrate the extent of any breach, and whether it was gross - not to establish the existence of a breach in itself.

Having considered Lion Steel's application, the Court concluded that to try the two manslaughter offences together would create a formidably difficult task for a jury which would be required to consider evidence of direct relevance to the death in relation to the individual charges faced by the directors but would then be directed to ignore such evidence when considering the Company's offence.

In light of this, the Court ordered that the corporate manslaughter allegation be tried separately from, and after, the other charges.

The trial & half time submissions

As a result of Lion Steel's application, the trial (which commenced on the 12 June 2012) related only to the gross negligence manslaughter and Section 37 HSWA charges faced by the directors and the Section 2 HSWA charge faced by the company.

Somewhat extraordinarily, the Prosecution chose not to call any Lion Steel employees to give evidence and primarily relied on correspondence and other documents passing between the company's insurance broker, insurer and external health and safety consultant, stretching back to 2002, to prove their case and establish the role each director played in safety at the Hyde site.

At the conclusion of the prosecution case all three directors made submissions of no case to answer in respect of the manslaughter charge they faced, with two directors (Mr Williams and Mr Coupe) also making submissions in respect of their Section 37 HSWA charge.

The Judge's Ruling on Directors' Duty of Care

Having heard submissions stretching over two days the Judge (HHJ Gilbart QC) stated in his ruling that whilst it was one thing to consider whether an employer was in breach of its statutory duty it was another matter entirely to consider if the tragic death of an employee had been caused by the gross negligence of a director. The office of director does not of itself create a duty of care to every employee. The evidence must be considered against each director individually.

When considering whether a director owed a personal duty of care the fundamental question is the measure of control and responsibility exercised by the director over the task being undertaken and the systems of work in operation. It will be important to identify whether the director had responsibility for addressing safety in relation to the work being carried out at the time of the accident. A Defendant can only be guilty of gross negligence manslaughter for an omission if he was under a duty to act.

Having considered the evidence which was put before the jury, the Judge ruled that the Crown had failed to adduce sufficient evidence upon which a properly directed jury could convict either Mr Williams or Mr Coupe of manslaughter. Mr Williams was also acquitted of the Section 37 HSWA charge.

The Judge found there was no evidence that Mr Williams owed the deceased a duty of care or that he had any control over work undertaken on the roof at Hyde. Furthermore, whilst an inference could be drawn that Mr Coupe owed the deceased a duty of care there was no evidence that there had been a breach of that duty, let alone any such breach was gross.

What happened next?

Having dismissed the manslaughter charges against Mr Williams and Mr Coupe negotiations were entered into with the Prosecution which resulted in agreement that Lion Steel would enter a plea to corporate manslaughter (albeit that offence was not being tried as part of the ongoing trial) with all remaining charges against the individual defendants being withdrawn. Having entered a plea of guilty to corporate manslaughter the trial was adjourned for sentence.

What was the sentence?

The level of fine imposed by the court (£480,000 plus £84,000 Prosecution costs payable over four years) was generally in keeping with the sentencing guidelines for corporate manslaughter which states fines will seldom be under £500,000. The Judge did indicate that he allowed a 20% discount for the company's guilty plea, which means any fine after trial would have been £600,000.

The fine in this case is probably more representative of the level of fines companies can expect rather than the penalties imposed in the two previous corporate manslaughter prosecutions (£385,000 and £187,500).

In passing sentence the Judge noted "I am very mindful of the 142 people who work at Lion Steel. I would regard it as a most regrettable consequence, which would add to the terrible consequences of Mr Berry's death, if the effect of an Order of this court were to imperil the employment of his former colleagues".

Lessons Learnt

In respect of the application and interpretation of the Act little has been learnt from this case; the trial did not involve the charge of corporate manslaughter. What would appear to have been demonstrated though is the extent to which the Crown are prepared, and willing, to bring charges against individual directors which invariably will put pressure on the corporate entity to plead guilty.

It is unclear if the intention behind prosecuting the directors of Lion Steel was to put pressure on the company to plead guilty and whether this will be a strategy that the Prosecution will deploy in future cases. Certainly, from an early stage in the proceedings, the trial Judge suggested that the Prosecution may be aiming too high with the case they had brought, in particular against the individual directors, but this did not deter them from pursuing the matter to trial.

The extent to which the liberty of the remaining director played a part in Lion Steel pleading guilty to corporate manslaughter can not be underestimated. However, directors must be aware of the fiduciary duty they owe to act in the best interests of the company. Allowing the company to plead guilty to corporate manslaughter could potentially expose them to future civil action, especially if the company were to go into liquidation due to the level of fine imposed by the court.

Whilst the issues of director imprisonment may not necessarily concern very large national, or multi-national, corporations where the Board, and shareholders, are remote from the individual charged with gross negligence manslaughter, this will be a real consideration for the SME where directors are also the decision makers within the business. The question is to what extent will an individual be prepared to sacrifice the organisation for personal freedom and to what extent are the Prosecution prepared to utilise this position to secure a corporate conviction.

If charging directors with gross negligence manslaughter becomes a feature of corporate manslaughter cases then it will be essential that adequate insurance cover is in place which will provide for legal representation of individuals as well as the corporate entity. It should also be borne in mind that, it is expected, from 1 October 2012 defence costs orders for defendants tried in the Crown Court will no longer be available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.